Business Plan: Too Early To Start A Succession Plan?

Business PlanningAs a business owner, you’re most likely consumed with the day-to-day running of your business and driving growth. It’s your baby and the last thing you want to do is sit down and make a plan for turning it over to someone else. As a TAB advisor, I have met owners who think they’re too young or believe that they’ll run the business for the rest of their lives, so why bother with succession planning? A 2014 PwC survey found that by 2019, more than half of Canadian family businesses are expected to change owners, but that only 20% of those businesses have a clearly documented succession plan in place for when the time comes.

Why does every business owner need a succession plan? We don’t have a window into the future and have no idea if or when events may arise that force succession – premature death, disability, personal or financial reasons or retirement. Without a succession plan, your business’s fate is uncertain and could be left in the hands of the court. It may also cause disputes among family members as to who should take over. The only way to control your company’s future and to protect yourself, your family and your employees is with a succession plan. I’ve outlined below what I feel are the three top options for succession.

  1. Transition the business within the family: If you choose to transition the business within the family, you’ll have to choose a successor. This may not be an easy (or popular decision) if multiple family members work in the business and all want the position at the helm. There may also not be a qualified successor among the family members, which brings with it a unique set of problems.
  2. Sell the business to a partner or employee(s): You’ll have to determine the value of the business. There are many factors that affect the value of your business, so it’s important to seek assistance in helping you calculate an accurate value. And the value of your business will continue to change so it will have to be re-evaluated on an ongoing basis.
  3. Sell the business to an outside buyer: Same as above.

It’s never too early to create a succession plan. It should be done by experts as it involves several disciplines including accounting, financial services, and law. There isn’t a one-size-fits-all succession plan template that you can download and plug information into. Each business owner will have different ideas about what their business succession should look like and the experts can ensure that your wishes are carried out.

I would be remiss if I also didn’t mention that in order for any succession plan to really succeed, you’ll need to have the right people and processes in place that allow for the day-to-day operations of the business to function without you.

No matter how good your succession plan is, it can’t anticipate changes that may affect your business in the future, which is why it will constantly have to evolve and change. I believe in starting early, setting expectations, and making the decisions that are right for you and your business. Succession planning is the only way to control the fate of your business.

Have you started working on your succession plan? Want more advice on succession planning, or general advice from a seasoned business advisor? Find out if a TAB Board is right for you!

Advertisements

Don’t Put All Your Eggs in One Basket

millennials-networking-ftrAs a business owner, you feel fortunate when landing a large client. This client can become your bread and butter, but this could also mean that your success is tied to theirs, and if they struggle, so will your business. Should another supplier offer your client better pricing or packages, their loyalty to your business can be compromised. Your largest client may have overdue payments or expect lower prices if they know your dependency on them. However, a greater concern is if you are spending all of your time and resources focused on your main source of income, you are likely to neglect or not seek additional clients.

There certainly are benefits to having larger clients, including the consistent revenue stream and workload, aligning your brand with their reputation, and possible referrals and references when trying to land new clients.

In my 30 years of business experience, I’ve found it critical to diversify your client portfolio with large and smaller clients. In doing so, you reduce the risk of the impact to your business if a large client leaves.

Despite your best efforts, losing a key client can be devastating for some businesses, especially when more than 30% of your business is reliant on them.

Here are a few suggestions I’d recommend to help you safeguard your business from the loss of a large client:

1. Stay connected with all your clients

As the business owner, making a call to your client’s C-level person is critical in gauging the health of their business. Ensure you speak with that person on an ongoing basis and integrate your value. If they do stop working with you, hopefully you’ve laid the groundwork for working with them in other capacities (e.g. as a consultant on an as-needed basis) or keeping the door open for their possible return or referrals to other businesses.

2. Foster Business Development

Create an action plan for networking and building an ongoing flow of potential clients. Leverage your existing clients for new business. Participate at networking events and seek referrals from clients.

3. Advance your marketing efforts
Create a lead generation marketing plan to support your business development efforts. This might include call out campaigns, email blasts, downloads, boosting social networking posts, and pay per click.

4. Join a Peer Advisory Board
It’s been proven that by sharing with other like-minded individuals, it helps to increase your bottom line. Members of Peer Advisory Boards are asked to contribute industry information or business ideas and meet on a regular basis, sharing best practices, networking, and putting forward objective recommendations. By hearing encouragement through a different perspective from other business professionals, you can help grow your business.

Through the continual development of a diversified client base, losing a large client will not devastate your business, but stand as a learning experience and opportunity for growth.


A Sales Responsibility Checklist

checklist-300x199

As a business advisor, one of the top issues business owners ask for advice on is how to increase sales.  My response is always the same: sales is at the heart of every company, and every employee is responsible for it, but in different ways.

No matter what size your business is, there are several touch points in a sales process, whether that is expanding your services with an existing customer or sales to a new customer.

When you are looking at your company’s sales, don’t just look at the person or people with “sales” in their titles; there is a role for everyone. Here is my checklist for sales accountability, that once checked off, will help you get a clear picture of where your sales infrastructure might need some help, and if everyone in place will help you increase sales.

  • Owner sets the sales strategy
    A sales strategy is usually written to cover a year and might include outlining the focus of what services/products target which customer, acquisition vs. sales growth with an existing customer, and long and short-term sales goals for each, as well as determining the sales cycle and which markets you will go after. A sales strategy lays out the steps and methods necessary for customers in different stages of the sales cycle.
  • Marketing supports that strategy
    Your marketing team or agency needs to create a plan to support this with marketing activities, including promoting your website, creating digital promotions, trade show collateral, social media, phone scripts, presentations, campaigns, sell sheets, banner ads or online advertising as well as list acquisition and management.
  • Execution by the sales team
    Although each sales person has to take responsibility for the execution of the strategy, they need to first understand the strategy and their role in executing it.  You’ll need to work with your sales team or with your Director of Sales to ensure they understand your strategy, and to explain which marketing tools they have to support their efforts. They need to know techniques to handle both customer acquisition as well as customer retention opportunities.  For example, if they are to execute a call-out campaign to new customers, make sure they understand the value proposition and have support materials at hand to provide to the client.
  • Walk the Walk
    From the person who answers the phone and your customer service staff to your technicians and any front line staff, every touch point with a customer or potential customer must be positive and genuine. Each interaction with a customer is an opportunity to make a lasting impression of the value your company brings to the table.  If they are spoken to in a valued and respectful manner, it could make the difference between investing further with your current services or allowing you to speak with them about your new services/products.

Share your sales strategy with your entire team as all your employees contribute, even in a small way, to helping your business grow.  Never underestimate the power of a warm greeting – it can lead to more sales than you might think.


Things to Consider When Determining the Value of Your Business

bg04Whether you’re considering selling your business, or are just interested in knowing how to put a value on your investment, the evaluation process can often prove difficult.

There are a number of factors you might want to consider when evaluating your business’ net worth.

Your team, assets, processes and recurring revenue are key factors in evaluating your business when reviewed with the net earnings and cash flow. These key factors help to reduce the buyer’s risk and significantly increase the multiple used in the transaction and the total company value. Ultimately, the business is worth whatever the buyer thinks it’s worth, but you can estimate your value by looking at several different factors including the ones I’ve shared with you below:

Consider your team

When evaluating the value of your business, it is important to include the key employees and management team. Buyers generally require a strong management team to continue to run the business and are concerned with your own knowledge of the business — relationships, processes and ideas. They’ll question what the impact will be on the company if the owner is no longer operating the business.

Look at current business processes already in place

A business process is a set of steps or tasks that you and your team use repeatedly to create a product or service, reach a specific goal, or provide value to a customer or supplier. When processes work well, they can significantly improve efficiency, productivity, and customer satisfaction. This is an ongoing process, but ensure you have a plan in place to document all of your processes. This allows a buyer to see how you process your offerings and allows them to see what is involved in the operations of your business and can show your business is independent from you.

Assess the recurring revenues

Recurring revenue is predictable revenue that can be expected to continue in the future. It makes a company more stable and certain, both operationally and financially. Having recurring revenue as a portion of your total revenues lowers the risk associated with a company’s operations, and can help your company withstand a hiccup in sales. Establishing recurring revenue isn’t only good for business – it ensures you’ll get the maximum value when it comes time to sell.

Evaluate hard & soft assets

A company’s assets are an important factor to consider when determining value. There are hard assets, such as equipment, furniture, and inventory, and there are soft assets, such as patents, trademarks and software. Consider if all of your business’ assets are for sale or if you plan to include accounts receivable and inventory. Hard assets have value, which can be calculated by estimating the resale value of your equipment, furniture, and inventory. The value placed on soft assets such as patents, trademarks and software, can be a greater proportion of the total value of your business than is the value of tangible assets.

Evaluating your business properly is not a simple undertaking since it concerns several factors, many of which are hard to quantify. It is recommended that business owners looking to sell their business consult with an expert in order to reach a realistic estimated price, but the factors noted above will have a significant impact on the price a buyer will be willing to pay.


LinkedIn: A Powerful Business Tool at Your Fingertips

linkedin tipsLinkedIn is the world’s largest professional network, with over 300 million registered users in over 200 countries and territories, so it should come as no surprise that LinkedIn is one of the most powerful business development tools available today. Business owners and key sale leaders can leverage the power of LinkedIn for forging strong connections and finding new business.

LinkedIn has become the new “Rolodex”, the go-to place for finding colleagues, current clients, potential clients and vendors. With a professional profile, image and regular participation in groups, your network will increase, which in turn increases your reach and exposure and potential business opportunities. Many business owners would agree that LinkedIn has great potential, but are either concerned about the time commitment or are unsure how to go about getting started.

Here are a few simple steps to get you started in engaging in business development activities on LinkedIn:

  • Step 1 – Look Professional: Just like a face-to-face introduction, your profile page is your first chance to make a good impression. Users with complete profiles are 40 times more likely to receive opportunities through LinkedIn. This means:
    • Invest some time in writing a professional summary
    • Add your skills
    • Have a professional picture taken (do not take a selfie)
    • Add volunteer experience and any awards you have won

They have recently added a recommendation feature on LinkedIn, which is like having an endorsement for your services. Try to have at least 4 recommendations on your profile page.

  • Step 2 – Make Connections: Having a long list of connections is essential for increasing exposure and the likelihood of others finding you, but make sure they are the “right” type of connections.
    • Decide if there is an industry you want to target or a type of job title e.g. accountant – simply search for exactly what you are looking for
    • Once you have a few potential connections, find out more about them by visiting their profiles, seeing if you have connections in common, where they are located, etc.
    • Send them a connection request by introducing who you are and the reason for contacting them
    • If they accept your invitation, be active and take the initiative by arranging a phone call or a face-to-face meeting
  • Step 3 – Join Groups: Think of these as a local Chamber of Commerce. There are groups for every industry, and they function as a place to ask questions, perform research, make new connections, and get noticed.
    • Search groups that you think your target audience will visit
    • Join ONLY as many groups as you can manage. Groups tend to send notifications, which is good if you plan to keep up with them, but annoying if you don’t
    • Participate in the groups on a regular basis if you can. Your audience needs to hear from you and see you being active and offering expert advice
    • Comment on other people’s posts, “like” them, and most importantly see who the regular contributors are and see if there is opportunity to work together or connect in some way
    • To connect with them, follow Step 2

In addition to using LinkedIn as a business development and marketing tool, the platform can also be used for recruitment. Whether it’s sharing a job posting on your company profile, or paying for a job posting or sponsored job ad, LI allows you to see in a click of a button a more complete look at your candidates.

As you can see, LinkedIn has a lot to offer but the biggest step is making the decision to give it the time it deserves to foster and manage potential leads. From personal experience, investing time in LI as a business development tool will yield results that far outweigh that time investment.

Do you use LI for business development now? How much time do you dedicate to it and are there other features of LI that you have found helpful for business development?


What Kind of Networker are You?

Are-you-a-great-networker

My last blog focused on the importance of business networking as a tool that can be used to build your business’ brand and expand your professional contacts. Finding your fit and incorporating networking into your business plan and regular schedule can greatly increase the benefits of taking part in different networking functions and platforms.

Your next step is to uncover what kind of personality you adopt when in a networking situation. Do you make the first move? Are you a card collector? Find out what your networking style is from the descriptions below.

The Observer: You often hang back in networking situations and soak up what is going on around you. You prefer one-on-one conversations, so you often engage in conversations with individuals who are seated at your table. Your professional network is small, but you are close with each individual contact. Try to find networking situations where one-on-one conversation is encouraged and focus on making solid connections with those you speak too. It’s about quality over quantity, after all. Make sure that you commit to following up with connections made.

The Reactor: You are open to making as many connections as possible, but you prefer to be approached rather than make the first move yourself. You prefer to look for some kind of connection or association with someone rather than completely cold contact. You also like to follow-up with someone about specific questions or information rather than a general or vague follow-up. Because of these tendencies, don’t worry about bothering potential contacts, because your subtle approach and specific questions do not come on too strong.

The Socializer: As a socializer, you are looking to make a friend in any situation. You are good with faces and names but not as strategic in understanding how you can create mutually beneficial business connections. Because of your social, friendly, nature, adopting more systematic follow-up after networking events will complement your strengths and make networking worth your while.

Initiator: You are an active networker, but take a balanced approach to forming professional connections with people. You seek diverse networking opportunities that fit your style and include others in conversation. You are an excellent relationship builder in that you seek to understand others’ perspective and unique selling point and contribute useful information to conversations. As an initiator, you understand the difference between selling and helping and seek to make long-term relationships with others.

Director: A director is strategic and methodical about networking. You are very present in a variety of networking circles and your name pops up a lot in different settings. Make sure that your networking efforts are focused and you approach networking as a means to relationship build versus solely trying to expand your network. When you make people feel valued, they are more willing to engage with you and your message!

Every networking personality has unique strengths – which category do you fall under? Which personality do you prefer interacting with? I look forward to your thoughts below.


Starting A Business – Think First, Act Second (Part 2)

Handing-over-the-keys-to-the-businessBecoming an owner by purchasing an existing business is very different than starting your own company, which I discussed in last week’s blog post. There are a few important misconceptions that people have when it comes to buying a business, including the idea that purchasing an already successful company means continued success with a new owner.

Buying an existing business does not mean you avoid the risk that comes with starting your own, but instead that the risk just presents itself in a different form.

The following 4 steps are what I believe to be the most important in the process of purchasing a business.

1. Decide Exactly What You Want

It is important that you understand exactly what you’re looking for in a business before you even begin searching. A clear set of requirements and characteristics must be set right from the beginning.

2. Gather Options and Screen Them

As the saying goes, do not put all of your eggs into one basket. Take your time and find more than one candidate that meets your requirements.  Having a pool of candidates that all meet your requirements allows you to compare options and gain a well-rounded perspective.

Be sure to collect as much accurate information about your potential suitors as possible. The more accurate information you obtain, the more you can reduce your risk. Knowledge is power! Do your research, verify your sources, and validate your findings!

3. Think Critically

Once you have gathered all the information necessary on each candidate, you must critically consider each of them and best determine what effects a change of ownership will have.  As a potential new owner, it is your responsibility to consider how a transfer of ownership will affect the brand, reputation, and success of the business. Is the success of the business due in part to its ownership? Will the employees stay? Will clients continue to work with the business? Do not leave these questions unanswered!

4. Determine Value and Make Your Offer!

It is time to start thinking numbers after narrowing down your search. What are you willing to spend for a business? Does this align with your potential candidates? The sellers may not be on the same page with you when it comes to business value, so be prepared to field those discussions. Once you have determined the appropriate value, make your offer and move forward!

Are you embarking on the process of purchasing an existing business? Have you considered the real risk and how to counter it? Let me know what you think in the comments!